Exhibit 10.40
Penn Octane
Corporation
Chairman Services Agreement
This
CHAIRMAN SERVICES AGREEMENT (this “ Agreement ”)
is entered into on March ,
2007, with an effective date of January 1, 2007
(the “ Effective Date ”), by and between
Penn Octane Corporation, a Delaware corporation (the “
Company ”), and
an individual residing in the State of
(“ Chairman ”). The Company and Chairman are
each a “ party ” and together are the “
parties ” to this Agreement.
WHEREAS , Chairman is to serve as chairman and as a
member of the Board of Directors of the Company and the Company
desires to compensate Chairman for his service (“Board
Services”) as chairman and director and for his service
(“Committee Services”) as a member of such committees
of the Board of Directors of the Company as the board may determine
from time to time.
NOW
THEREFORE , in
consideration of the mutual benefits to be derived and the
representations and warranties, conditions and promises herein
contained, and other good and valuable consideration, the
sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as
follows:
1. Services to be
Provided . The Company hereby engages Chairman to provide, and
Chairman hereby agrees to provide to the Company, the Board
Services and the Committee Services during the Term (as defined
below).
2. Chairman
Compensation .
a. As compensation for serving as chairman,
director and board committee member, the Company shall pay to
Chairman an annual fee of Twenty-Five Thousand Dollars (US
$25,000.00) (the “Chairman Fee” ) and
shall grant an annual option valued at approximately Six Thousand
Two Hundred Fifty Dollars (US $6,250.00) (the “ Chairman
Option ”), such option value determined in accordance
with the Company’s usual accounting procedures, providing
Chairman the right, but not the obligation, to buy shares of the
Company’s common stock at an exercise price equal to not less
than one hundred percent (100%) of the fair market value of such
shares on the day of the grant, for a period of not more than five
(5) years. Fair market value shall be determined in accordance with
the stock plan under which the Chairman Option is granted and
otherwise in accordance with applicable law and regulation. In lieu
of calculating the number of shares subject to the Chairman Option
based on a fixed dollar valuation, the Board of Directors may, in
its sole discretion, grant the Chairman Option based solely on a
fixed number of shares. As a condition to the exercise of the
Chairman Option, the Board of Directors may, in its sole
discretion, impose a condition of continued services for a period
of not more than one (1) year following the date of
grant.
b. As compensation for performance of
additional Board Services and Committee Services, the Company shall
pay to Chairman an additional fee of One Thousand Two Hundred Fifty
Dollars (US $1,250.00) per Working Day (the “
Additional Fees ”) except as otherwise set forth
herein. “ Working Day ” means a calendar day
during which Chairman provides significant Board Services or
Committee Services to the Company, including without limitation the
attendance of meetings of the Board of Directors and any committees
of the Board of Directors, and specifically including days spent
solely or primarily in travel to or from locations at which
Chairman provides Board Services or Committee Services. Chairman
shall not receive any Additional Fees for preparing for and
attending on an annual basis four (4) quarterly meetings of
the Board of Directors, four (4) quarterly meetings of any
committee of the Board of Directors of which Chairman is a member
and one (1) annual meeting of stockholders, if any. Each
payment of Additional Fees is subject to review and approval by the
Board of Directors. No Additional Fees shall be paid to Chairman
if, under any applicable law, regulation or rule, such payment
would disqualify Chairman from membership on the Board of Directors
or any board committee on which Chairman serves.
3. Payment of Fees
.
a. The Chairman Fee shall be paid in equal
quarterly installments beginning January 1, 2007. The Chairman
Fee shall be pro-rated for any period of less than one full year of
Board Services, including a pro-rated amount for the period
November 1 – December 31, 2006.
b. The Chairman Option shall be granted on
the date of the first quarterly meeting of the Board of Directors
in each year beginning January 1, 2007, unless otherwise
determined by the Board of Directors.
c. The Additional Fees shall be payable
within thirty (30) days following receipt from Chairman of a
written statement setting forth the specific dates during which
Chairman provided the additional Board Services or Committee
Services and reasonable detail regarding the nature of such
services; provided, however, that the Company shall not be required
to pay Additional Fees more frequently than once per calendar
quarter, and that the Company shall be entitled to defer payment
accordingly on any services set forth in a services
statement.
4. Insurance . As
additional consideration for Chairman agreement to serve as
chairman and director of the Company, the Company agrees to
provide, and maintain thereafter, a directors’ and
officers’ insurance policy with an aggregate coverage limit
of at least $5 million dollars with an insurance carrier
having at least an A.M. Best rating of “A” or its
equivalent.
5. Reimbursable
Expenses . Chairman shall be entitled to reimbursement for
reasonable expenses incurred by or on behalf of Chairman for the
benefit of the Company and attributa
